Evaluating Alternatives for Raising Funds

ORNE Corporation plans to raise $2 million to pay off its existing short-term bank loan of $600,000 and to increase total assets by $1,400,000. The bank loan bears an interest rate of 10 percent. The company's president owns 57.5% percent of the 1,000,000 shares of common stock and wishes to maintain control of the company. The company's tax rate is 30 percent. Balance sheet information is shown below.

The company is considering two alternatives to raise the $2 million: (1) sell common stock at $10 per share, or (2) Sell bonds at a 10 percent coupon, each $1,000 bond carrying 50 warrants to buy common stock at $15 per share.

Zinc inc. is considering the acquisition of a new processing line. The processor can be purchased for $3,750,000. It will cost $165,000 to ship and $85,250 to install the processor. A recently completed feasibility study that was performed at a cost of $65,000 indicated that the processor would produce a positive NPV. Studies ha

1.Managing the firm's liabilities includes all of the following EXCEPT
1. cash.
2. accounts payable.
3. notes payable.
4. accruals.
2.The wealth of the owners of a corporation is represented by
1.earnings per share.
2.cash flow.
3.share price.
4.profits.
3.The financial manager may be

What would be the most important principles of managing operating exposure from the perspective of a financier?
What are some examples (that are not Market Selection, Pricing Strategy, Product Strategy, Input Mix, Shifting production among plants, Plant location, raising productivity, Planning for Exchange Rate Changes, or Fi